Lapas attēli


The Honorable Eugene A. Ludwig
Page 2

Provide similar information where occ merely has required
the violators to change their practices.
As requested (Tr. p. 36), please provide copies of the 14
consumer complaints filed with occ last year involving
mutual funds. Please advise us of the final disposition of
these complaints. with respect to the seven complaints that
resulted in restitution to the customer (Tr. p. 144), please
describe the nature of the violation involved, and whether
restitution was voluntarily offered, or was required by the

4. As requested (Tr. pp. 45, 49), please provide information on

how many instances and involving what progran areas or violations (i.e., fraud against customers, insider trading, etc.) occ has made enforcement referrals to the SEC. Please explain your policy in this area and provide us with copies

of any written guidelines. 5. As requested (Tr. p. 63), please advise the Subcommittee how

many banks have a suitability program, what these programs
entail, how they are examined and enforced, and how these
programs differ from the requirements of the NASD
suitability rule (see NASD Manual -- Rules of Fair Practice,
Art. 111, S2 I 2152 (Recommendations to customers)).
Please inform us (Tr. p. 65) whether all 300 banks examined
by Occ this year have adopted the NASD requirements as their

program, and, if not, how many have done so. 6.a. You testified (Tr. p. 112) that 12 USC S 1818 authorized occ

to enforce the federal securities laws and the rules and regulations thereunder. Please support and explain that statement. In particular, please explain how violations of the federal securities laws by a bank, its securities subsidiary, or a third party broker-dealer can be considered "unsafe and unsound banking practices." Also, please advise whether any court has ever considered 12 USC 1818 to reach violations of the federal securities laws and the rules and

regulations thereunder. b. As requested (Tr. p. 137), please submit a report on all the

actions taken by occ against banks or their employees for
violations of the federal securities laws. Please segregate
cases brought against banks in their capacity as municipal
securities and government securities dealers, and as
transfer agents, and those where the violations involve bank
mutual fund or securities sales. Your report also should,
by reference to the attached table from the SEC's annual
report to Congress, explain in general the persons subject
to, acts constituting, and basis for the enforcement action
as well as what sanctions occ can bring to bear. Please


The Honorable Eugene A. Ludwig
Page 3

compare and contrast your investor protection enforcement

program with the program administered by the sec.
c. Please submit for the record, as requested (Tr. pp. 146,

147), copies of the specific rules that occ has with regard
to the rights (e.g., arbitration, private rights of action)
of aggrieved individuals in connection with bank securities
activities, and explain the application of these remedies.
Please state for the record whether it is the position of
the occ that the National Bank Act pre-empts the application
of the federal securities laws, and, in particular, the

OCC's view on Simpson v. Mellon Bank. NA (ED. Pa. 1993). d. SEC enforcement actions are made public by the preparation

of litigation releases (sample copy enclosed) which are
publicized under news releases (significant cases are then
reported in the press) and by publication in the weekly SEC
Docket (sample copy enclosed). The NASD maintains an 800-
number that allows the public to check on a registered
broker-dealer's disciplinary history before making a
decision to do business with him. Moreover, the self-
regulatory organizations, i.e., the exchanges and the NASD,
are required to discipline their members and, as you may
have observed, those actions are reported in the Wall Street
Journal and New York Times. We have established this system
so that customers can protect themselves in part by having
access to the enforcement and disciplinary histories of
broker-dealers. Please advise us of the Occ's program in
this regard, providing us with copies for the record of the
documents you publish on occ enforcement actions in
connection with bank sales of mutual funds or other

If you have no such program, please so state. How can a potential customer find out if there is a pattern of examiner requests that a particular bank or its employees

"change their practices" (Tr. p. 34) in this area? 7. As requested (Tr. p. 134), please submit a report on the

progress of the occ and SEC in coordinating your respective
examination and enforcement programs. Your report should
include a list of the dates, participants, and summaries of
any and all interagency meetings on this subject, and copies
of any memoranda of understanding between occ and SEC with
respect to the terms and conditions of such joint
examination and enforcement programs. Are there any joint
enforcement efforts currently pending between the SEC and
the occ?


The Honorable Eugene A. Ludwig
Page 4

If you have any questions about this request, please contact Consuela M. Washington of the staff at (202) 225-3147. Thank you for your cooperation and assistance with the work of the Subcommittee.



John D. Dingell

Chairman Subcommittee on Oversight

and Investigations



The Honorable Dan Schaefer

[ocr errors][merged small][merged small][merged small][merged small][merged small][merged small]

Thank you for your letter of March 17, 1994, in which you requested additional information on issues arising from the proposed merger between the Dreyfus Corporation (Dreyfus) and Mellon Bank Corporation. We have endeavored to provide you with the requested information.


How does 12 C.F.R. Part 9 ("Part 9") protect investors in a mutual fund or purchasers of other securities in a bank? Has the OCC ever used its 12 C.F.R. Part 9 ("Part 9") authority to protect investors in a mutual fund or purchasers of other securities in a bank?

Part 9 protects investors as well as trust customers who receive investment advice and purchase mutual funds or other securities from a national bank or its employees. National banks that provide investment advice must first apply to and receive authorization from the OCC to exercise fiduciary powers pursuant to 12 U.S.C. & 92a. See, e.g., Decision of the Comptroller of the Currency Concerning an Application by American National Bank, Austin, Texas, to Establish an Operating Subsidiary to provide Investment Advice (1983), reprinted in (1983 - 1984 Transfer Binder) Fed. Banking L. Rep. (CCH) 99,732; Interpretive Letter No. 367 (1986), reprinted in (1985 - 1987 Transfer Binder) Fed. Banking L. Rep. (CCH)


Part 9 contains provisions governing the treatment of funds awaiting investment or distribution, the investment of funds held as fiduciary, prohibitions against self-dealing, and compensation of bank fiduciaries. Part 9 requirements also apply to any investments made by a national bank trustee, including mutual fund investments, and prohibits self-dealing by fiduciaries. Bank trustees may not purchase proprietary or bank-advised mutual funds unless authorized by state law, trust instrument, court order, or consent, and only when appropriate for the account.

- 2. The OCC may take enforcement action against a national bank, its employees, or any institution-affiliated party' who violate the self-dealing or other relevant provisions of Part 9 when providing investment advice to customers. Although the OCC has not yet used Part 9 to bring a mutual fund-related formal enforcement action, the OCC has brought enforcement actions against national banks for improprieties in the administration of collective investment funds. For example, in 1989, the Comptroller revoked a national bank's trust powers when a trust officer purchased stock (in which the bank's president and a director had a conflicting interest) for the bank's common trust fund, in violation of the conflict of interest prohibition in 12 C.F.R. $ 9.12. In the Matter of Central National Bank of Mattoon, AA-EC-87-83 (1989). The Comptroller also found that the bank violated 12 C.F.R. 9 9.18 for its failure to value trust assets properly.


Please provide a list, with an explanation of the alleged wrongdoing and the sanction applied, of OCC enforcement actions where sanctions have been applied against banks or their employees in connection with mutual fund sales. Provide similar information where OCC merely has required the violators to change their practice.

As I stated during the March 3 hearing, the OCC has not initiated final, formal administrative action against national banks or national bank employees expressly in connection with mutual fund sales activities. The OCC, however, has undertaken significant steps to ensure that national bank mutual fund activities are conducted in accordance with applicable law and are protective of customer interests.

Where the OCC finds less significant compliance issues, we address them through examination criticisms, letters to bank boards, and other informal enforcement mechanisms. Where national banks fail to adequately respond to these criticisms, the OCC is committed to seeking all appropriate formal enforcement remedies. As stated in the our Securities Activities Enforcement Policy (Attachment A), the OCC believes that formal enforcement action is particularly appropriate to address cases involving customer abuse, fraud, and other deceptive or unfair practices in mutual fund or other securities sales. When pursuing formal enforcement actions, the OCC generally seeks remedies based on comparable SEC actions. Id.

Since January 1993, the OCC has reviewed the mutual fund activities of 250 community banks and approximately 75 bank holding companies, controlling 430 national banks. During

'Under federal banking law, the term "institution-affiliated party includes: 1) directors, officers, employees, controlling stockholders, or agents of an insured depository institution; 2) any other person who has filed a change in control notice; 3) shareholders, consultants, joint venture partners, or other persons who participate in conducting an insured depository institution's affairs; and 4) independent contractors, including attorneys and accountants. 12 U.S.C. § 1813(u).

« iepriekšējāTurpināt »